China may be undermining its effort to build strong ties with its neighbors and draw them away from the U.S. orbit as it seeks to impose its will in territorial disputes with Japan and Southeast Asian nations.

Relations between Asiaâ€™s two biggest economies deteriorated to the lowest point in five years during the 17-day detention of a Chinese fishing boat captain before Japanese authorities last week decided to release him. China opposed U.S.-South Korea military exercises aimed at deterring North Korea, and dismissed regional efforts to mediate maritime territorial claims.

Those positions reflect a more assertive diplomatic role in Asia over the past decade as China developed into Asiaâ€™s biggest economy. China set up a regional forum, flooded Malaysia and Thailand with tourists, boosted economic aid to countries including the Philippines and participated in Association of Southeast Asian Nations security dialogues.

â€œChina has tried to establish an image in the region as a nice guy, but all of this could be in a shambles right now,â€ said Huang Jing, a visiting professor at the National University of Singaporeâ€™s Lee Kuan Yew School of Public Policy. â€œThe real issue here is whether Beijing cares.â€

Chinaâ€™s stance may benefit U.S.-Japan relations strained by a dispute over relocating American troops.

Japanese Prime Minister Naoto Kan and President Barack Obama in New York met Sept. 23 on the sidelines of the United Nations General Assembly, and â€œreaffirmed their commitment to strengthening the U.S.-Japan alliance,â€ according to a White House statement.

Replaced Hatoyama

Kan in June succeeded Yukio Hatoyama, who made improving Chinese ties key to his administration and said in December that â€œJapan-China relations are developing in a strategically beneficial way.â€ Hatoyama resigned in June after signing an agreement with the U.S. to keep a Marine base in Okinawa over the objections of local residents and members of his government.

Chinese Premier Wen Jiabao refused to see Kan in New York. The boat captain was arrested Sept. 7 near islands in the East China Sea claimed by both China and Japan close to natural gas fields. The two countries signed an agreement in 2008 that has yet to be implemented to jointly develop the fields.

The captainâ€™s release came hours after Japan said four of its citizens were being held in China for allegedly videotaping military targets. Chief Cabinet Secretary Yoshito Sengoku said the government didnâ€™t think it was related to the dispute.

China demanded an apology and compensation for the seizure of the trawler and its crew over the weekend, which Japan rejected.

Rare-Earth Metals

Sengoku couldnâ€™t confirm reports that China has cut off Japan-bound exports of rare earth metals, which are used in hybrid vehicles and laptop computers as well as night-vision goggles and naval radar. A Chinese official denied the reports.

â€œChina is testing Japan as domestic politics have been unstable and Japan-U.S. ties shaky,â€ said Koji Murata, professor of international relations at Doshisha University in Kyoto. The dispute with China â€œprovides an opportunity for the Japanese to be reminded of the importance of U.S. relations.â€

The U.S. is also rebuilding ties with Asean. Heads of many of its member states, including Vietnam, the Philippines and Malaysia, met Obama on Sept. 24. Obama told the group that the U.S. has an â€œenormous stake.â€ The leaders issued a statement calling for the peaceful settlement of maritime and other regional disputes.

Foreign Ministry spokeswoman Jiang Yu told reporters Sept. 21 that â€œChina enjoys indisputable sovereign rights over the South China Sea islands and adjacent watersâ€ and opposes the U.S. discussing such conflicts with Asean.

Meanwhile, South Korea and the U.S. are planning naval exercises in the Yellow Sea aimed at deterring North Korea, which an international probe found had torpedoed and sank a South Korean patrol boat in March. China has not accepted those findings and North Korean leader Kim Jong Il visited China twice this year, both times meeting with President Hu Jintao.

China is opposed to the exercises, and Chinese general Luo Yuan in August said that the government could retaliate through its holdings of $846.7 billion in U.S. Treasury securities. China is the biggest foreign holder of U.S. government debt.

Chinaâ€™s reaction to the captainâ€™s detention included canceling youth visits, a protest outside of Japanâ€™s embassy in Beijing and at least six summons of the Japanese ambassador. Huang said the response reflects the need to look tough on territorial issues amid jockeying for power ahead of 2012 leadership changes, when Hu and Wen are set to step down from their Communist Party posts.

â€œThis will hurt China,â€ said Robert Dujarric, director of the Institute of Contemporary Asian Studies at Temple Universityâ€™s Tokyo campus. â€œThe reaction makes it seem to be coming from a petty, third-world country.â€

Call it the Georgia lesson. In 2008, Russia informed the United States and the rest of the West that the former Soviet Caucasus and Central Asia were no longer their playland, but rather Moscow's sovereign sphere of influence. How did it do so? By going to war with Georgia.

Now we have China informing Japan -- and the rest of Asia -- that the Diaoyu Islands in the East China Sea are its territory in which to fish and whatever else it wishes. Like Russia, Beijing did so by demonstrating that it was prepared to go to almost any extreme -- in this case short of war, but including the crippling of several Japanese industries -- to press its territorial claim. This includes rights over the big oil and gas reserves in the islands. Today Japan blinked. After this, will Japan continue the presumption that it is in charge of what it calls the Senkaku islands? Not if it wishes to continue to manufacture the Prius, as Andrew Leonard notes at Salon.

The difference of course is that, with all due respect to Russia and Georgia, this case concerns truly serious players. The breathtaking part is China's readiness to dismissively take on Japan, the world's third-largest economy.

Today, President Barack Obama is to meet with the 10 worried member states of the Association of Southeast Asian Nations. In a joint statement and with Obama behind them, they will suggest that China is bad, bad, bad to have forced its way with Japan, and wrong, wrong, wrong if it thinks it will get away with it again.But, as with the Georgian incident, is the U.S. prepared to go to war to press its case? Are any of the ASEAN nations? That was Russia's bluff in 2008; it is China's now.

A smart oilman told me yesterday over lunch that the rise of China was never going to be like the rise of Japan in the 1980s. Japan was a commercial power without imperial pretensions; China is both.

At the Financial Times, Geoff Dyer says this is not just the caprice of Chinese rulers, but the prodding "of powerful groups within the party-state system." This includes China's oilmen and other industrial leaders, Linda Jakobson of the Stockholm International Peace Institute tells Dyer, "new actors [who think] it is time for China to take its place on the world stage."

China's leviathan brawl over a single fishing boat captain over the last few days is a territorial issue: China's red line. In 2008, Russia signaled that it could be friends with the West, as long as no one presumptuously trod on its turf. China is saying the same thing now. That, in addition to the value of the yuan, marks out the new arena of tension between it and the West.